Court denies contraception coverage injunction

Employers seeking to obtain an injunction against the Patient Protection and Affordable Care Act’s (PPACA) contraceptive mandate on religious grounds may have a hard road ahead, if the 10th Circuit’s ruling in Hobby Lobby Stores Inc. v. Sebelius is any indication.

Among the health care law’s most controversial provisions is the requirement that most secular, for-profit employers either provide their workers with insurance coverage that includes Food and Drug Administration-approved contraceptives and sterilization, or pay a penalty.

David Green, whose family owns the arts and crafts chain Hobby Lobby and Christian bookstore chain Mardel Inc., sought an injunction against the contraception mandate, claiming that the law violates his and his family’s religious beliefs by forcing them to provide coverage for certain types of birth control, including the “morning after” and “week after” pills, which they consider to be tantamount to abortion.

U.S. District Judge Joe Heaton denied the request for an injunction in November 2012, ruling that, though he was “not unsympathetic” to the company’s argument, “the court has not found any case concluding that secular, for-profit corporations … have a constitutional right to the free exercise of religion.”

On Dec. 20, 2012, a two-judge panel of the 10th Circuit upheld the district court’s decision, and Supreme Court Justice Sonia Sotomayor subsequently denied the company’s request for an emergency injunction.

“The Supreme Court did not take the position that the case had no merit, but instead took the position that in order for this litigant to obtain injunctive relief … they would have to show that their entitlement to relief was indisputably clear,” says Littler Mendelson Shareholder Steven Friedman, who chairs the firm’s employee benefits practice group.

Tenuous Ties

In their suit, Hobby Lobby’s owners argued that the contraception mandate violates their First Amendment right to freedom of religion, as well as the Religious Freedom Restoration Act of 1993 (RFRA). The latter forbids the federal government from substantially interfering with an individual’s exercise of religion unless it “is in furtherance of a compelling government interest” and “is the least restrictive means of furthering that interest.”

Other circuit courts have granted injunctions based on similar arguments (see “Conflicted Courts”). But in its opinion, the 10th Circuit panel found it unlikely that a court would interpret the RFRA “to encompass the independent conduct of third parties with whom the plaintiffs have only a commercial relationship.”

The link between an employer’s health insurance contribution and an employee’s subsequent medical decisions has been a sticking point for some courts, says Ogletree Deakins Shareholder Karen Brandon. “It’s been hard for [companies] to really show that there’s enough of a direct relationship from the employer providing this as a benefit and then an employee going out as a patient and asking her doctor to fill this prescription,” she says.

Hobby Lobby also unsuccessfully contended that it should only have to show “questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation,” instead of “substantial likelihood of success on the merits.”

Weighing Options

Initially, Hobby Lobby’s deadline for complying with the PPACA was Jan. 1, although the company has since shifted the plan year for its employee insurance, allowing it to postpone that decision for several months. If the company still refuses to comply with the law, it has said that it would face fines of $1.3 million a day while the case works its way through the courts.

Employers who are not as willing to pay a potentially hefty penalty have several options. First, they can simply comply with the mandate until more courts have weighed in on the issue. “We would just advise [clients] not to step out in front on this, unless they’re ready for a lengthy and costly legal battle,” Friedman says.

If compliance is too unpalatable, however, business owners with religious or ethical objections to the mandate may be able to compromise with plan design changes, which could ensure that employee premiums—not employer contributions—go toward funding contraceptives, according to Brandon. “The way the requirement’s written, it’s more you can’t have cost-sharing or charge an extra fee for [employees] to go get the benefit, but as far as how the benefit’s initially funded, the rules don’t really address that,” she says.